Goenka Diamond and Jewels Limited

Report on the Standalone Ind AS Financial Statements

Disclaimer of Opinion

We were engaged to audit the accompanying standalone Ind AS Financial statements of Goenka Diamond and Jewels Limited (“the Company”), which comprise the Balance Sheet as at 31st March, 2024 and the Statement of Profit and Loss (including other comprehensive Income), Statement of Cash Flows and the Statement of Changes in Equity for the year then ended, and notes to financial statements, including a summary of the significant accounting policies and other explanatory information.

We do not express an opinion on the accompanying standalone Ind AS financial statements of the Company. Because of the significance of the matter described in the Basis for Disclaimer of Opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on this standalone Ind AS Financial Statements

Basis for Disclaimer of Opinion

(a) We draw attention to Note No 17 (3) of the standalone financial statements regarding commencement of Corporate Insolvency Resolution Process (CIRP) under Insolvency and Bankruptcy Act, 2016 and appointment of Interim Resolution Professional (IRP) to carry function as mentioned under the Code. Consequently, the powers of Board stand suspended and are exercised by the IRP in line with the provisions of the Code. Subsequent to issue of public announcement by IRP, the claims submitted by the financial creditors, operational creditors and operational creditors (Govt. Dues) have been collated and admitted by the IRP. Attention is invited to Note No. 17 (4) wherein the secured financial creditors have submitted claims amounting to Rs. 49,408.27 lakhs against the outstanding amount of Rs. 17,730.38 lakhs as appearing in the books of accounts of the company. The differential amount of Rs. 31,677.89 lakhs has which is pertaining to interest and other adjustments have not been accounted for and to that extent interest and liability has not been provided by the Company. Also, no accounting adjustment has been carried out of any short and/or excess claims received by the IRP in respect of Operation Creditors (Govt. Dues) amounting to Rs. 5,070.17 lakhs and other operational creditors of Rs. 29.77 lakhs.

(b) We draw attention to Note No. 17 (5) of standalone financial statements regarding default in repayment of loans and interest to banks (including ARC) owing to which the banks have classified the account as NPA and recalled its loans and has initiated various legal actions for recovery of its dues including legal action initiated under SARFESI Act, The Recovery of Debts due to Banks and Financial Institution Act, 1993. The outstanding loans, credit balances and interest due to banks (including ARC) amounting to Rs. 17730.38 lacs and adhoc / repayment of loan amount to an asset reconstruction company (ARC) of Rs. 1405.61 lacs for which no confirmation/ statements have been provided to us are subject to reconciliation and subsequent adjustments.

(c) Refer Note No. 9(a), (b) and (c) of financial statement regarding non-provision of the expected credit loss/ impairment relating to overdue Trade Receivables of Rs. 69768.84 Lacs as per the requirement of Ind- AS 109 “Financial Instruments”. In view of defaults in payment obligations by the Trade Receivables on due date, non-recoveries from Trade Receivables, non-receipt of confirmations/ reconciliation from Trade receivables, initiation of legal action/ suits against Trade Receivables by the company, notices/ summon to the Company from Enforcement Directorate, Reserve Bank of India, Development Commissioner of Surat SEZ and in absence of clear forward looking information regarding outcome of pending legal actions initiated and time frame and quantum of realisability of these Trade receivables, we are unable to determine the amount of expected credit loss/ impairment based on provision matrix as per the requirements of Ind-AS 109 “Financial Instruments” and its consequential impact, on the financial results.

(d) Trade payables and other payables amounting to Rs. 29717.66 lacs are outstanding since long for which neither any confirmation have been provided nor are we aware of any legal action initiated by the vendors against the Company. In absence of current status and relevant details, we are unable to comment on the payment obligation in this regard and its consequential impact on the financial statements.

(e) Refer Note No. 9(b), 18(b) and 5(a) of the financial statement wherein, the company has not translated following monetary items denominated in foreign currency as at year ended closing rate and has been carried forward at the rate as at 31st March 2015, 31^st March 2016, and / or 31st March 2017, which is not in accordance with Ind-AS -21 “The Effect of changes in Foreign Exchange Rates” and accounting policy followed by the Company.

i. Trade receivable amounting to Rs. 69,703.18 lacs

ii. Trade payables and other payable amounting to Rs. 29,717.66 lacs

iii. Loans to subsidiary (including accrued interest) amounting to Rs. 2,127.08 lacs

The company has not provided for cumulative exchange gain (net) on the above items amounting to Rs. 14163.00 lacs including exchange gain of Rs.1369.09 lacs pertaining to the year ended on March 31, 2024 respectively. Accordingly, exchange gain is understated by Rs. 1369.09 for the year ended March 31,2024.

(f) The Company has made provision for expected credited loss of Rs. 877.13 Lacs against the interest receivable on loan from a subsidiary and has recognized loss of Rs. 49.00 lacs on current investment designated through FVTPL. No deferred tax assets thereon amounting to Rs. 233.09 lacs have been recognized which is not in accordance with Ind AS-12 “Income Taxes.

Had the exchange difference as stated in para (e), deferred tax as stated in para (f) and financial creditors as stated in para

(a) above been provided, the overstatement and understatement of assets and liabilities are as under: -

Due to uncertainties with respect to settlement of bank dues and interest, adjustments of trade receivables and payables and its consequential impact on taxation thereof, we are unable to ascertain the tax impact and liability, on the financial results.

(g) Refer Note No. 5(b) and 40(c) of the financial statement, no provision for the expected credit loss/ impairment on loan to a subsidiary amounting to Rs. 1249.95 Lacs has been recognized as per the requirement of Ind- AS 109 “Financial Instruments”. The net worth of above subsidiary is negative and based on reasonable and supportable information regarding the current financial status and business condition of the subsidiary, there has been significant increase in credit risk and there could be delay/default in recovery of this amount. Considering the above, we are unable to comment on the amount of expected credit loss/ impairment and its consequential impact, on the financial results.

(h) The Inventory has been taken on the basis of physical verification carried out by the management (including inventory lying with franchisees on approval basis) as at the year end and its valuation is based on determination of estimated net realizable value and specific identification which involves technical judgment of management. In the absence of any valuation by an independent expert, we have relied upon by the physical verification and valuation of the Inventory as certified and determined by the management.

(i) Refer Note No. 40(b) of the financial statement regarding investment of Rs. 2.03 lacs in its subsidiary namely M.B. Diamonds LLC and Rs. 7.44 lacs in its subsidiary namely Goenka Diamond and Jewels DMCC, the net-worth of these subsidiaries is negative. The Company has not made any provision for Impairment against these investments and advance.

(j) Balances with Banks amounting to Rs. 1.55 lacs (debit balances), Other non-current deposits amounting to Rs. 13.23 lacs, other current assets (balance with government authorities) amounting to Rs. 32.48 lacs, Other Current Assets and Liabilities are subject to confirmations and consequential adjustment thereof

Material Uncertainty related to going concern

The Company’s operating results have been materially affected due to various factors including non-realization of unconfirmed Trade receivables, defaults in repayment of loans and interest to banks, non-availability of finance due to recall of loans by banks in consortium, legal actions/ insolvency proceedings initiated by banks against company for recovery of its dues, notices/ summon to company/director(s) from Enforcement Directorate, Reserve Bank of India, Development Commissioner of Surat SEZ and from other regulatory authorities, commencement of CIRP proceedings as stated in Note No. 17(3) of standalone financial statements, Debt Recovery Tribunals and other courts for recovery of banks dues and possession/attachment/sale of company’s properties, assignment and transfer of dues in favor of an asset reconstruction company (ARC), pending income tax demands and consequent attachment of bank accounts by Income tax department, reliance on occasional sales for meeting out expenses, overall substantial decrease in volume of business and sales, non-payment of statutory dues and taxes, overdue unconfirmed trade payable, non-realization of loan and interest thereon from a subsidiary etc. We are also unable to determine the impact of actions and forthcoming actions that may be taken by various legal and statutory authorities due to various factors mentioned herein above. These events cause significant doubts on the ability of the company to continue as a going concern. The appropriateness of the going concern assumption is dependent on the company’s ability to raise adequate finance from alternative means, settlement of its due from banks and ARC, outcome of CIRP process and recoveries from overseas Trade Receivables to meet its short term and long term obligations as well as to establish consistent business operation. The above situation indicates that material uncertainty exist that cast significant doubt on company’s ability to continue as a going concern.

Because of the significance of the matters described above in the “Basis of Disclaimer of Opinion” section of our report, absence of sufficient appropriate audit evidences and Material uncertainty related to Going Concern paragraph above, it is not possible to form an opinion on the financial statements due to the potential interaction of the multiple uncertainties and their possible cumulative effect on the financial statements. Accordingly, we do not express an opinion on the financial statements.

Responsibilities of Management for the Standalone Ind AS Financial Statements

In accordance with the applicable provisions of the Insolvency and Bankruptcy Code, 2016 (“the Code”) and related rules and regulations issued thereunder, Corporate Insolvency Process (“CIRP”) of Goenka Diamond and Jewels Limited was initiated by financial creditors. The Hon’ble National Company Law Tribunal (“NCLT”), Jaipur Bench, vide order no. CP(IB)2067/ MB/2019 delivered on 11th April 2022 appointed an Interim Resolution Professional (“IRP”) to manage affairs of the Company in accordance with the provisions of Code. Thereafter, NCLT vide order dated April 12, 2023 appointed Mr. Sourabh Malpani as IRP replacing the previous IRP appointed. Upon appointment of IRP under the Code, the powers of the Board of Directors of the Company remained suspended and vest with the IRP.

The Company’s Board of Directors is responsible for the matters stated in Section 134 (5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these Standalone Ind AS Financial Statements that give a true and fair view of the financial position, financial performance, cash flows and changes in equity of the Company accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) prescribed under section 133 of the Act.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and the maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Standalone Ind AS Financial Statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the financial reporting process of the Company.

Auditor’s Responsibilities for the Audit of the Standalone Ind AS Financial Statements

Our responsibility is to conduct an audit of the Company’s financial statements in accordance with Standards on Auditing and to issue an auditor’s report. However, because of the matter described in the Basis for Disclaimer of Opinion section of our report, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these standalone Ind-AS financial statements.

We are independent of the Company in accordance with the Code of Ethics and provisions of the Companies Act, 2013 that are relevant to our audit of the standalone Ind-AS financial statements in India under the Companies Act, 2013, and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics and the requirements under the Companies act, 2013

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s report) Order, 2016 (“the Order”) issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the “Annexure A” a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by section 143 (3) of the Act, we report that:

a. As described in Basis of Disclaimer of Opinion paragraph, we are unable to obtain all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. Due to possible effects of the matters as described in the Basis of Disclaimer of Opinion paragraph, we are unable to state whether proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

c. The Balance Sheet, Statement of Profit and Loss including the Statement of Other Comprehensive Income, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account;

d. Due to effects/ possible effects of the matters described in Basis for Disclaimer of Opinion paragraph, we are unable to state whether the aforesaid standalone Ind-AS financial statements comply with the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014, Companies (Indian Accounting Standards) Rules, 2015, as amended;

e. As at March 31, 2024, there are no directors on the board of the Company. Accordingly, reporting on compliance of section 164 (2) of the Act is not applicable;

f. The matters described in Basis of Disclaimer of opinion paragraph and other observations made in statement on the matters specified in paragraph 3 and 4 of the Order above, may have an adverse effect on the functioning of the Company.

g. With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure B” to this report;

h. With respect to the other matters to be included in the Auditor’s Report in accordance with the requirements of section 197(16) of the Act (as amended), in our opinion and to the best of our information and according to the explanation given to us, the remuneration paid by the Company to its Directors during the year is in accordance with the provisions of section 197 of the Act;.

i. With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its Ind AS financial statements - Refer Note 38 to the Ind AS financial statements;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts;

iii. The amounts which were required to be transferred to the Investor Education and Protection Fund by the Company have been transferred.

iv. (a) The Management has represented that, to the best of its knowledge and belief, no funds (which are material

either individually or in the aggregate) have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person or entity, including foreign entity (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

(b) The Management has represented, that, to the best of its knowledge and belief, no funds (which are material either individually or in the aggregate) have been received by the Company from any person or entity, including foreign entity (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

(c) Based on the audit procedures that have been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material misstatement.

v. The Company has not declared or paid any dividend during the year and therefore compliance of Section 123 of the Act, is not applicable.

vi. The reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is applicable from April 1,2023.

Based on our examination which included test checks, the feature of recording audit trail (edit log) facility of the accounting software used for maintaining books of accounts was not enabled for the period from April 1, 2023 to August 31,2023. Except for the observation mentioned above the audit trail (edit log) facility for the remaining periods was enabled and operated for the accounting software, we did not come across any instance of the audit trail feature being tampered with.

For Ummed Jain & Co.

Chartered Accountants ICAI Firm Reg. No.119250W

U. M. Jain

Partner

Membership No.070863 Mumbai: May 30, 2024 UDIN No: 24070863BKEHII2767